SoftBank's India kitty set to cross $10bn

Masayoshi Son has been able to build up a significant shareholding in India’s most valued internet and technology companies, like mobile payments giant Paytm, hospitality company Oyo and ride-hailing major Ola

Japanese telecom and internet major SoftBank is set to cross the $10-billion milestone in the country as it closes investments in two e-commerce ventures — baby care retailer Firstcry and sector-focused logistics company Delhivery.

Both of these are expected to be in the $400-450 million range, helping the Japanese billionaire Masayoshi Son-led firm cross the promised number in less than five years after he announced in October 2014 that he will invest $10 billion over a decade.

Son has been able to build up a significant shareholding in India’s most valued internet and technology companies, like mobile payments giant Paytm, hospitality company Oyo and ride-hailing major Ola. SoftBank also owned a stake in the country’s largest e-tailer Flipkart, which it divested to US retail major Walmart last year.

For context, the total capital invested by SoftBank will now be more than the combined assets under management of the top five India-focused venture capital (VC) fund managers. These firms, which include Sequoia Capital India and Accel India, manage a little over $8 billion across multiple funds and have been operating in the country for a decade.

SoftBank’s aggressive deal-making spree helped define the pace of aggressive fund-raising, backing local players like Flipkart and Snapdeal, as well as Ola, against such well-funded US-based rivals as e-tailer Amazon and ride-hailing major Uber, respectively.

“We never comment on numbers and future investments. We are very excited by the potential that India offers as a market and remain committed to it for the long term,” said Munish Varma, partner at SoftBank Investment Advisers, in an emailed statement to a query from TOI.

While SoftBank made its first big bet in India in 2011 when it invested $200 million in mobile advertising platform InMobi, it aggressively started investing in 2014 when it picked up stakes in Snapdeal, Ola and Housing in quick succession.

At that time, the investments were being helmed by Nikesh Arora, the former Google executive that Son had picked as his successor, and were being made out of SoftBank’s balance sheet.

Some investments like Housing and Snapdeal, where it also clashed with founders of the company, did not work out as planned. While Housing got acquired by PropTiger, SoftBank later also invested in online retailer Flipkart and Paytm Mall, which directly compete with Snapdeal.

This has made some founders wary of taking investment from SoftBank, as Ola CEO Bhavish Aggarwal specifically negotiated rights protecting himself against the Japanese firm.

But 2016 saw two significant changes — the exit of Arora, and the launch of the $100-billion SoftBank Vision Fund, with which it has started taking bolder bets. This fund is headed by India-born Rajeev Misra, a former senior Deutsche Bank executive.

“The difference in their strategy is clear before and after Nikesh Arora. The current team is mostly I-bankers, and for them to take the kind of leaps of faith that Arora used to take is difficult,” said one investor who has tracked SoftBank in India closely.But for founders and investors, SoftBank also remains the biggest pool of capital. For instance, with its investments in Flipkart and Paytm in 2017, it was able to provide significant liquidity to early investors in these companies. This trend is likely to accelerate.

“In the next two years, they will be a very important source of liquidity for early investors in their portfolio companies,” said the investor mentioned earlier.

A recent Allahabad high court judgment may, however, provide some relief with the court ruling that there shall be no tax levied in case of purchases made at duty free stores at the arrival or departure terminals.